TREASURIES-Yields rise off three-week lows on solid GDP data

NEW YORK, Oct 26 (Reuters) - U.S. Treasury yields rose from three-week lows on Friday after data showed the U.S. economy slowed less than expected in the third quarter, though bonds were stronger on the day after an earlier drop in stock markets boosted demand for safe haven U.S. government debt.

A tariff-related drop in soybean exports in the third quarter was partially offset by the strongest consumer spending in nearly a four years and a surge in inventory investment.

“It was a pretty good GDP result on balance,” said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott in Philadelphia. “It seems like the Treasury markets are taking this as modestly economically positive, bond negative.”

Benchmark 10-year notes were up 11/32 in price on the day to yield 3.094 percent, up from a three-week low of 3.077 percent set earlier on Friday.

Bonds were bid overnight as stock markets slid, with the decline occurring after Alphabet and Amazon's earnings missed expectations on Thursday.

“The rates markets are taking their cues right now from risks assets, as marked by equities most obviously,” said LeBas.

Concerns about a slowdown in China, tensions between the European Union and Italy regarding Italy’s spending plans, and some weak U.S. corporate earnings reports have hurt risk sentiment this week.

They have also prompted some speculation that weak equity markets could derail the Federal Reserve’s plans to execute further interest rate hikes.

Loretta Mester, president of the Cleveland Fed, said on Thursday that the recent cratering of stock markets is nowhere near severe enough to rattle confidence and significantly hurt U.S. business and consumer spending.

Investors are also worried that trade tariffs and a tight labor market will push wages and inflation higher, which could necessitate additional rate increases.

Next Friday’s payrolls report for October will be watched for signs of rising wage pressures. (Editing by Bernadette Baum) )